We don’t know how long this is going to last.
The novel coronavirus (COVID-19) has come and is here to stay for… Weeks? Months? Over a year? While our lifestyles are being warped because of the disease, the economy is likely headed into a recession. But have no fear: unlike the last recession, I believe this one will be mercifully short and will see many stocks—particularly artificial intelligence (AI) stocks—score big on the rally.
The word “recession” is now being bandied about with regularity and, at this point, it seems appropriate. We’re going to see a loss in the order of billions of dollars of economic activity globally as people stop going to restaurants, bars, sporting events, concerts, on cruises, on vacation, etc.
That will, of course, see a massive drop in revenue for a good number of companies. Furthermore, the coronavirus is going to impact millions of people in the service industry as they no longer have work, what with everything being shut down.
U.S. Treasury Secretary Steve Mnuchin recently told a group of Republican senators that the U.S. unemployment rate—without major government intervention—could reach 20% because of the coronavirus. (Source: “Mnuchin Warns Virus Could Yield 20% Jobless Rate Without Action,” Bloomberg, March 17, 2020.)
Right now, economic stimulus packages worth up to as much as $1.0 trillion are being discussed as the U.S. government scrambles to find tools to deal with the economic side effects of the coronavirus.
Mnuchin was reported to have said that the economic fallout from the coronavirus could be worse than the 2008 financial collapse.
Things that were, up to this point, unheard of, like a temporary universal basic income, are being discussed as potential remedies—or at least salves—for the ailing economy.
But here’s the thing: while this crisis has the potential to devastate the economy, and already has to a large degree, there will be a huge rally in the stock market’s near future.
That’s because, unlike the 2008 financial collapse, this economic downturn isn’t being brought on by structural instability or bad dealings on Wall Street. Instead, this downturn is being brought on by a virus.
The COVID-19 virus will come and go and, hopefully, be mitigated in terms of how deadly it will be. But in the end, the economy will return to business as usual in pretty short order following the crisis.
There may well be lasting damage to several industries, like cruises and airlines—certainly some restaurants will go under—due to the lack of customers for months or longer.
But overall, I believe the economic recovery will be swift and bountiful. That’s especially true for some of our favored stocks at Profit Confidential: tech stocks.
While tech stocks are not escaping the turmoil being wrought by the current market collapse, that’s really no fault of their own.
As the coronavirus crisis plays itself out, there’s really no reason to believe that any lasting damage will be done to tech stocks. That’s because the future that awaited us before we had even heard the name COVID-19 is still there.
Which is to say, a world full of AI, 5G, renewable energy, and a whole host of other exciting industries is set to break out in the coming months and years.
While COVID-19 has certainly reshaped the timelines for many of those advancements, it hasn’t derailed them. And I believe that, right now, many tech stocks are actually in a perfect position for investors to consider.
At their current bargain prices, these stocks will likely be considered steals in the years to come as they not only rally during the market comeback but also expand as their respective industries grow.
In fact, I’d say this may be one of the best times in recent memory to be a tech stock investor.
NVDA Stock & Other AI Stocks to Win Big
One stock I’ve had my eye on for a while is NVIDIA Corporation (NASDAQ:NVDA). This tech stock aims to be on the forefront of AI technology. Therefore, I’ve designated it as one of the premier AI stocks.
I’ve been covering—and have been bullish on—NVIDIA stock since I started at Profit Confidential over three years ago.
Looking at NVDA stock’s progress over that time, it’s easy to see why.
Chart courtesy of StockCharts.com
Before the current stock market crash took place, NVDA was hitting its stride in 2020, gaining over 200% since I first wrote about it years ago.
But what makes NVIDIA stock so special in the first place?
NVIDIA Corporation is mainly known for selling graphics processing units (GPU) that are used in high-end gaming computers, but the company has its sights set on a industry far bigger than gaming; a trillion-dollar industry, in fact.
NVIDIA’s dominance in the GPU space is translating into dominance in the AI industry. A large part of the AI market will rely on cutting-edge GPU technology. And NVIDIA simply has no rival in that area.
The company’s strength in the GPU market means that everyone else is playing catch-up. And, frankly, there’s no better market to be leading in right now than AI technology.
Consider that McKinsey & Company estimates that, in 2020, we could see AI and machine learning create up to $2.0 trillion in value in manufacturing and supply chain planning, as well as $2.6 trillion in marketing and sales. (Source: “Roundup of Machine Learning Forecasts and Market Estimates for 2019,” Forbes, March 27, 2019.)
Given that those numbers will have to be heavily reconsidered post-coronavirus, the fact remains that there is a huge swell of momentum building behind the AI industry.
Furthermore, the coronavirus really has no bearing on AI stocks. While it may slow down research and the like, the bottom line is that the AI revolution is coming.
We’re talking about a potential multi-trillion-dollar industry growing from almost nothing over the next 10 years. The AI market isn’t just big business; it’s the biggest business there is. AI technology has almost limitless potential.
LinkedIn’s “2020 Emerging Jobs Report” named “artificial intelligence specialist” as the job that saw the most growth in the the previous five years—when comparing different jobs’ hiring growth rates every year, averaged out. (Source: “2020 Emerging Jobs Report,” LinkedIn, last accessed March 20, 2020.)
The report shows a 74% jump each year in AI specialist hirings, on average, since 2015.
“At this stage, most of the workforce doesn’t work in the emerging field of artificial intelligence, but that doesn’t mean it won’t impact everyone,” said the report.
“Artificial intelligence will require the entire workforce to learn new skills, whether it’s to keep up to date with an existing role, or pursuing a new career as a result of automation.” (Source: Ibid.)
I could write for pages and pages about why AI stocks are the stocks of the future, but more importantly, what you need to understand is that the coronavirus-induced stock market downturn is providing a second opportunity to get in on the ground floor.
Many AI stocks were already surging before the market crash (as evidenced by NVIDIA stock), based on the potential in the market.
Now with the stock market setback, these stocks are falling in value rapidly and becoming bargains once more.
Even better, AI companies are largely virus-proof. Which is to say, while other industries may struggle in the immediate aftermath of COVID-19, there’s no reason to believe that NVDA stock and other AI stocks will face a similar slowdown.
That’s because, for all the problems we’re facing right now in the stock market, none of them have a concrete connection to tech stocks and, more specifically, to AI stocks.
While AI companies may not be recession-proof, they almost certainly will enjoy an easier time than other companies during the recovery.
I know with all the madness spreading, both on and off the stock market, it’s easy to feel like the world has turned upside down. But that’s an illusion. Ultimately, everything that was true before many of us had heard of COVID-19 is still true today. In this instance, I’m referring to the immense potential of many tech stocks, especially AI stocks.
AI companies were some of the highest valued companies on my radar pre-coronavirus. In my mind, the only thing of substance that has recently changed about AI stocks is that they are now trading at bargain prices.
In other words, I have little doubt that companies like NVIDIA Corporation will surge back to prominence when the stock market returns to normal. It may be a few weeks, a few months, or even more than a year, but I believe that AI stocks like NVDA stock will reach new heights sooner rather than later.
We could end up seeing triple-digit gains from NVIDIA stock for those willing to wait out the current stock market storm.
Sure, things will be volatile in the near term and we’ll see our fair share of ups and downs. But the attraction of NVDA stock and other AI stocks is that the future belongs to this industry. That hasn’t changed.